‘Interest free period’ or ‘grace period’ on your credit card represents the timeframe between the bill cycle’s end to the due date of payment. Grace periods may vary from bank to bank and based on the type of credit-card, but usually it ranges from 20 to 30 days. Grace period is an incentive that is only available to those who repay their credit-card bills consistently, and thus if a customer is late in paying the debt amount on their credit-cards finance charges will be calculated and the grace period does not apply.
Calculating Interest-Free Period or Grace Period
Typically, the grace period begins with the first date of the billing cycle, and exceeds the last day of statement period by around 15-25 days. The statement issued by the credit-card company usually includes the total outstanding amount (calculated at the end of the grace period) and all the purchases.
Essentially, the grace period represents the maximum amount of time a Credit Card user has to settle his bills. Furthermore, this does not imply that every transaction made with the Credit Card has that many interest-free days.
For instance, a person, as a first-time credit card user spends Rs. 5000 on the first day of their monthly payment cycle. The person pays down their outstanding debt on the due date at the conclusion of the billing cycle, clearing their balance. As a result, they will not be charged interest on their purchases in the coming month. This represents the grace period. However, if the person fails to pay a part-amount from the first month, the underpaid amount would begin collecting interest at the start of the billing period, and thereby the person will not be entitled to a grace period and interest costs will accrue to purchases made in the second month.
One of the best ways to utilize your interest-free period is by making smart purchases. Planning your purchases based on billing cycles will help you manage your finances better, since you’ll have access to more disposable income. For instance, if you want to make a purchase on 15th of April, and the purchase is not urgent, postponing the purchase say to 25th April such that it falls on the first day of the next billing cycle will let you make the payment for this purchase on 10th June, instead of 10th May. By smartly managing your purchases and delaying the purchases by a couple of days (based on billing cycle) you’ll be able to avail more funds to yourself in the month of April.
Thereby, it is very important how you can save yourself from being charged interest during the grace period granted by the bank. Cardholders must remember that if credit card bill payment is not up to date and not paid in full, they cannot enjoy any grace period.
If you are not able to repay your credit card loans, consider loan settlement. Register and talk to our counsellors for more information.